ENGINEERING ECONOMICS A capital investment of P508,000.00 on a project can produce an annual revenue of P383,000.00 for 5years. Thereafter will have a salvage value of 7% of the investment. The cost of operation and maintenance would be P150,000 per year; taxes and insurance will be 10% of the first cost per year. The company expects the project to earn not less than 25% before income taxes. Is this a desirable investment? What is the payback period of the investment?

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.